Drug Store Retailing - US - March 2019

OVERVIEW
What you need to know
Definition
EXECUTIVE SUMMARY 
Overview
The role of drug stores
What you want to know
What we see
The role of technology
What you want to know
What we see
The beauty opportunity
What you want to know
What we see
The food and drink opportunity
What you want to know
What we see
What it means
THE MARKET – WHAT YOU NEED TO KNOW
Pace of sales growth slows
Prescriptions are big business
Aging population presents an opportunity and a threat
Americans’ efforts to prioritize their health and wellness is a plus for drug stores
Consolidation drives change
MARKET SIZE AND FORECAST
Positive market conditions fueling expected growth
Figure 1: Total US drug store revenues and fan chart forecast, at current prices, 2013-23
Figure 2: Total US drug store revenues and forecast, at current prices, 2013-23
MARKET BREAKDOWN
Growth occurring in the largest sectors: prescriptions and health/beauty
Figure 3: Share of total US drug store revenues, by segment, at current prices, 2018
Figure 4: Total US drug store revenues and forecast, by segment, at current prices, 2013-23
MARKET PERSPECTIVE
Mergers and acquisitions only make the big guys bigger
CVS Health and Aetna
Amazon steps into the healthcare industry
Acquisition of PillPack
Partnership with Berkshire Hathaway and JPMorgan Chase
Launch of personal medical devices
Walgreens and Rite Aid
MARKET FACTORS 
An aging population presents opportunities
Figure 5: Number of households, by age of householder, 2008 and 2018
Holistic health and wellness approaches become the norm
Obesity gets worse
Figure 6: Prevalence of obesity among US adults aged 20 and over, 2008-18*
Number of uninsured Americans cut in half
Figure 7: Prevalence of Americans who are uninsured,* 2005-17
Health care costs rise faster than average incomes
Figure 8: Median household income, by race and Hispanic origin of householder, in inflation-adjusted dollars, 2007-17
Figure 9: Household income distribution, shares by age of householder, 2017
KEY PLAYERS – WHAT YOU NEED TO KNOW 
Drug stores look to add convenience and accessibility
Rite Aid is feeling very exposed
Exploring new partnerships and targeting opportunities
WHAT’S HAPPENING?
Evolution is underway as drug stores test new store formats
Walgreens
CVS
Membership programs could help to mitigate channel leakage
Walgreens
CVS
Drug stores are trialing delivery programs
Walgreens
CVS
Figure 10: CVS direct mail featuring delivery services, June 2018
WHAT’S STRUGGLING?
Rite Aid needs a turnaround
Figure 11: Rite Aid stock price, February 2019
WHAT’S NEXT?
More to smile about: dentistry comes to drug stores
Catering to seniors
Walmart and Anthem
Amazon and AARP
Incentives for wearables
Walgreens and Microsoft team up to tackle the future of healthcare
Increasing employee productivity through digital devices
THE CONSUMER – WHAT YOU NEED TO KNOW 
Drug stores are losing shoppers
Men are a prime target
Nearly half of consumers are multichannel shoppers
More than a place for healthcare and medicine
Battle for beauty share heats up
Good place for quick fill-in groceries
RETAILERS SHOPPED 
Key highlights
Leading drug stores sandwiched in the middle
Figure 12: Retailers shopped – Inside versus outside channel (net), December 2018
Figure 13: Retailers shopped, December 2018
Mass merchandisers and Amazon garnering younger consumers
Figure 14: Retailers shopped, by age, December 2018
Price wars, rather than income level, dictate where consumers shop
Figure 15: Retailers shopped, by household income, December 2018
While grocery stores are gaining overall, they are likely losing share of multicultural consumers to Walmart
Figure 16: Retailers shopped, by race and Hispanic origin, December 2018
Limited options for rural consumers
Figure 17: Retailers shopped, by geographic area, December 2018
ITEMS PURCHASED BY CHANNEL
Key highlights
Opportunity to create stronger associations with drug stores and nonmedical items
Figure 18: Items purchased by channel – Select categories (net), December 2018
Figure 19: Items purchased, by channel, December 2018
Opportunity to increase basket size or number of trips
Figure 20: Repertoire groups of items purchased by channel – Drug store, December 2018
Men are a prime target
Figure 21: Repertoire groups of items purchased by channel – Drug store, by gender and age, December 2018
Figure 22: Items purchased by channel – Drug store, by gender and age, December 2018
METHOD OF SHOPPING
Key highlights
In-store shopping preferred
Figure 23: Method of shopping, December 2018
Figure 24: Retailers shopped, by method of shopping, December 2018
Enhancing the in-store experience
Figure 25: Method of shopping, by generation, December 2018
Catering to multichannel shoppers
Figure 26: Attitudes toward drug store websites, by generation, December 2018
ATTITUDES TOWARD SHOPPING AT DRUG STORES
Key highlights
Drug stores catching up from an omnichannel perspective
Figure 27: Attitudes toward drug stores’ digital capabilities, by generation, December 2018
Parents are looking for little conveniences
Figure 28: Attitudes toward drug stores’ digital capabilities, by parental status, December 2018
Retail clinics not seen as comparable to one’s own physician
Figure 29: Attitudes toward retail clinics and in-store seminars, gender and age, December 2018
Apathy may impede drug stores’ ability to change perceptions
DRUG STORE BEAUTY OPPORTUNITY 
Key highlights
The landscape
Drug stores should go after grocery stores for share of beauty
Figure 30: Total US retail sales growth of beauty products, by channel, at current prices, 2013-18
Figure 31: Top five retailers shopped for beauty and personal care products, June 2018
The consumer
Women 18-34 should be a targeting focus
Figure 32: Drug store beauty shoppers, by gender and age, December 2018
Figure 33: Willingness to try new beauty products, by channel, February 2018
Natural, multipurpose, and clean beauty are trending topics
Results-oriented approach to beauty buying
BEAUTY ATTRIBUTES BY RETAILER
Key highlights
Price and product selection important attributes, but drug stores fall short comparatively
Figure 34: Beauty attributes by retailer, December 2018
Figure 35: Correspondence analysis – Symmetrical map – Beauty scorecard, December 2018
Drug stores more likely to be associated with inclusive product lines among multicultural beauty shoppers
Figure 36: Product variety attributes by retailer, by race and Hispanic origin, December 2018
Retailer-specific highlights
CVS key beauty initiatives
Walgreens key beauty initiatives
Rite Aid key beauty initiatives
Walmart key beauty initiatives
Target key beauty initiatives
Amazon key beauty initiatives
DESIRED BEAUTY OFFERINGS AT DRUG STORES
Key highlights
Samples, selection, and services play to the masses
Figure 37: Desired beauty offerings at drug stores, December 2018
Females 18-34 and moms core targets for any new drug store beauty initiatives
Figure 38: Desired beauty offerings at drug stores, by age of women and parental status, December 2018
Convenience-oriented services can draw in more men
Figure 39: Desired beauty offerings at drug stores, by men 18-44, December 2018
Personalized services appeal to non-Hispanic Black beauty consumers
Figure 40: Desired beauty offerings at drug stores, by race and Hispanic origin, December 2018
DRUG STORE FOOD AND DRINK OPPORTUNITY
Key highlights
The landscape
A secondary consideration, not a destination
Figure 41: Purchase incidence by channel – Any shopping (net), April 2018
Figure 42: Channels shopped by item, April 2018
The consumer
More quick fill-in grocery trips needed
Figure 43: Attitude toward drug stores as a grocery option, by age, December 2018
Price, convenience, and fresh products influence where people shop
Figure 44: Top five channel drivers, September 2018
Addition of healthy foods aids in perception changes
Figure 45: Attitudes around drug stores’ healthy food assortments, by gender and age, December 2018
Catering to organic shoppers and those with special diets
Figure 46: Attitudes toward food/drink shopping at drug stores, by gender and age, December 2018
APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Sales data
Fan chart forecast
Consumer survey data
Repertoire analysis methodology
Correspondence analysis methodology
Direct marketing creative
Abbreviations and terms
Abbreviations
Terms
APPENDIX – THE MARKET 
Figure 47: Total US drug store revenues and forecast, at inflation-adjusted prices, 2013-23
Figure 48: Total US drug store revenues, by segment, at current prices, 2016 and 2018
Figure 49: Drug store sales and forecast of health, beauty, and personal care products, at current prices, 2013-23
Figure 50: Drug store sales and forecast of health, beauty, and personal care products, at inflation-adjusted prices, 2013-23
Figure 51: Drug store sales and forecast of food and beverages, at current prices, 2013-23
Figure 52: Drug store sales and forecast of food and beverages, at inflation-adjusted prices, 2013-23
Figure 53: Drug store sales and forecast of general merchandise, at current prices, 2013-23
Figure 54: Drug store sales and forecast of general merchandise, at inflation-adjusted prices, 2013-23
Figure 55: Drug store sales and forecast of other* products, at current prices, 2013-23
Figure 56: Drug store sales and forecast of other* products, at inflation-adjusted prices, 2013-23
Figure 57: Population by age, 2013-23
Figure 58: Americans who are uninsured, by age, 2016-17
APPENDIX – THE CONSUMER 
Figure 59: Drug stores shopped – Past four weeks, August 2013-18
Figure 60: Drug store shopping frequency – Past four weeks, July 2017-August 2018
Figure 61: Retailers shopped by retailers shopped – Part one, December 2018
Figure 62: Retailers shopped by retailers shopped – Part two, December 2018
Figure 63: Interest in beauty trends, by age, February 2018
Figure 64: Interest in beauty trends, February 2018